Strategies Emerging To Preserve Starrett

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As the boxing match over Starrett City goes into its 10th month, the fight card has stayed the same: Preservation forces in one corner, market forces in the other. Tenants, housing advocates and government officials are still strategizing to keep rents low for the long term. And the owners of the Jamaica Bay complex with nearly 6,000 apartments are still trying to capitalize on their investment in a landmark housing development.

But in round one, preservation forces had a common opponent, an unpopular buyer whose $1.3 billion bid was knocked out in August. Now, the fight is less clear-cut, and the preservation advocates are diverging in tone and tactics.

Without a doubt, they all continue to support Starrett remaining a low- and moderate-income community, and they want rents to remain accessible to lower-income New Yorkers. But they differ in what an affordability plan should look like and how to get Starrett’s owners to sign on to such a plan.

The differences are emerging just after Starrett City Associates, the limited partnership that owns the development, filed papers late last month to withdraw from the affordable housing program under which the complex was built. Mitchell-Lama, the state program that gave developers tax breaks and favorable loan terms in exchange for keeping rents low, is expiring after decades of funding apartments for low- and middle-income New Yorkers. Starrett owners have been in the program long enough that they now can “buy out” of Mitchell-Lama. Or they can sell the property, as they tried to do earlier this year – and the new owner can take Starrett out of Mitchell-Lama. Any exit from the program will cause a spike in rents for at least two-thirds of the units (one-third still would be covered by the J-51 tax abatement that would keep the units in rent regulation).

Government officials are taking a diplomatic approach to the issue. They have been talking with Starrett City Associates, the long-time owner of the 140-acre, 46-building complex with at least 12,000 tenants. Since Clipper Equity’s $1.3 billion bid died in August, Starrett City Associates has had multiple discussions with government agencies, said Deborah VanAmerongen, the top housing official for New York state. Participating in those conversations are the state’s Division of Housing and Community Renewal, where VanAmerongen is commissioner; the state’s Housing Finance Agency, which holds Starrett City’s mortgage; the city’s Department of Housing Preservation and Development (HPD); and the federal Department of Housing and Urban Development. The agencies are leaving the door open to any of various possible deals, VanAmerongen said.

The Starrett Tenants Association is trying to take a more demanding tack – but is open to compromise. The association, in concert with New York ACORN, drew up a list of eight requirements for the current or future owner of Starrett. But, “there might have to be concessions on our part,” said Marie Purnell, president of the tenants’ association. “We’re always willing to sit down and be flexible, because the owners are entitled to do with their money what they like,” said Purnell, who has been a Starrett resident for three decades. She’d like the tenants to be included in the talks between DHCR and the owners “if possible.”

New York ACORN, the association’s partner in the fight, is taking a harder line. Ismene Speliotis, the executive director of New York ACORN Housing Corp., said the requirements released two weeks ago aren’t just general concepts. “They’re not kind of ‘get close,’” she said. They are “really requirements” for any party – including lenders and public agencies – involved in Starrett.

Regarding the difference in approach between her tenants group and that of ACORN, Purnell said, “that is probably something we’ll have to talk about.”

Besides keeping Starrett in Mitchell-Lama – which would keep rents hundreds of dollars below neighborhood market rates – there are the seven other demands. Based on ACORN’s statement and conversations with ACORN representatives, they are: making sure Starrett remains a community for low-income residents; maintaining the security, repair, health club and other services at the complex; protecting apartments with rent stabilization by passing legislation in Albany; basing future rents on where they are now; letting current residents stay in their apartments; and ensuring that families don’t lose subsidies, especially if they experience illness or other life changes.

Avoiding Clipper’s Fate

Asked what leverage tenants and their allies have to get Starrett owners to accede to those demands, an ACORN spokesman replied: “Just ask Clipper Equity.”

Clipper, the buyer spurned earlier this year, lost its bid to purchase Starrett after unrelenting attacks by city, state and federal officials on Clipper’s housing record and its commitment to keeping the development affordable. It didn’t help that Clipper principal David Bistricer was largely an unknown entity; even a key official involved wasn’t sure how to pronounce his last name in an interview last week. (According to his spokeswoman, it’s BISS-trih-sir.)

“Anyone who doubts the leverage of Starrett tenants should ask the development team behind the deal at Clipper Equity how they’re feeling right now,” said ACORN spokesman Jonathan Rosen. “Their deal got blown up.”

Still, ACORN is looking for what Rosen called a “win-win-win,” or a deal that works for Starrett owners, tenants, and taxpayers, who have heavily subsidized the complex.

That is overall a more aggressive stance than the one being taken by DHCR’s VanAmerongen and Purnell of the tenants’ association. And some government officials and tenants diverge over whether they want Starrett City to remain in Mitchell-Lama, the state affordable housing program under which Starrett opened in 1974. Tenants and ACORN are demanding the complex stays in Mitchell-Lama. But DHCR, which regulates Starrett and has final say on whether it can exit Mitchell-Lama, has been talking with the owners about several options, including allowing it to leave Mitchell-Lama.

VanAmerongen says her goal is to protect residents and preserve long-term affordability at the Jamaica Bay complex. In the conversations between Starrett City Associates and the government, the parties have been going over what options the complex has. “We’ve asked them to think about the different options for how it could be preserved as affordable housing,” said VanAmerongen. “I wouldn’t say that we’ve had negotiations,” she noted, but rather discussions. Starrett City Associates couldn’t be reached for comment.

VanAmerongen said she sees various options for the Starrett owners. One is that they stay in Mitchell-Lama and work out more generous financing terms. Another is that they exit the program by paying off their mortgage to the state’s Housing Finance Agency and then undertake financing to keep the complex affordable to residents. “I’m much more focused on the long-term result” of whatever deal is reached, she said, with that result being resident protection and affordability in the long run.

HPD Commissioner Shaun Donovan, the city’s top housing official, said he supports the owners keeping the complex in Mitchell-Lama. “It just doesn’t seem to make any sense to us to take it out,” because the owners would be able to keep the more-flexible rents and the $15 million in annual property tax breaks (that’s HPD’s estimate) they get under Mitchell-Lama, he explained.

The message that DHCR is sending to Starrett City Associates is “there could be a win-win here,” where the Starrett owners, government agencies, housing advocates and tenants would be satisfied, VanAmerongen said.

City Council Speaker Christine Quinn, who called Starrett “a critical housing resource” in a statement earlier this month, is sounding a similar note. Quinn spokesman Andrew Doba says, “the best option is that it remains affordable.”

Make It Last

Both government and tenant allies talk about “permanent affordability” for existing and future residents. The longevity of affordable housing is a big issue, because there wouldn’t be any legally mandated rent limits for Starrett once it leaves Mitchell-Lama, except in the the J-51 apartments. And the rent subsidies that tenants could get post-buyout, called “sticky vouchers,” wouldn’t make the buildings affordable long-term.

Of the nearly 90% of Starrett tenants who are benefiting from federal rent subsidies, almost all would be eligible for “sticky vouchers,” also called “enhanced vouchers.” However, tenants don’t always get them, because of a criminal record or paperwork errors. And the vouchers are for the tenant, not the apartment. That means when the tenant leaves Starrett, the rent reduction leaves with them, and the next occupant pays market rate. Voucher conversion does offer protection to tenants, said VanAmerongen, “but a voucher conversion at Starrett would be very disruptive.” That’s because hundreds of families would need to move to a smaller or larger apartment to meet the sticky voucher regulations, according to ACORN.

DHCR isn’t showing its hand about where this deal may go. Commissioner VanAmerongen said “many, many” prospective buyers for Starrett City have approached DHCR. But the agency doesn’t want to be steering business, and told those potential buyers to speak with the owner, VanAmerongen said.

“It really is the owner’s decision right now” about whether to sell, she said. “It’s also their decision whether they want to keep [Starrett City] affordable or not.” VanAmerongen declined to say which option her agency prefers.

“Saying one or the other is better or worse is not helpful to having an open dialogue,” she said. The DHCR commissioner also doesn’t have a deadline for when Starrett City Associates must reach a deal with the state, in order to avoid “an artificial deadline” that would pressure the owners. But, “we have made that clear to them that we want to move as quickly as possible,” she added.

In terms of a timeline, a Mitchell-Lama owner can leave the program one year after giving notice of intent to city or state government agency and to its tenants. The earliest Starrett can leave is Aug. 29, 2008.

Dina Levy, director of organizing and policy at the Urban Homesteading Assistance Board (UHAB), wonders whether any political tactic could prevent Starrett City’s owners from increasing rents to market rate. There would have to be a lot of public pressure to keep Starrett in Mitchell-Lama, she said. But with previous buyouts, there typically hasn’t been enough political will to keep them in that long-running affordability program.

“In terms of where the ability to preserve would come from, my guess is that it would have to be this major, major push by government,” said Levy. (UHAB is City Limits’ landlord).

In a sign of what looks like a citywide trend, government support also may have a role in another developing battle over a sizable Mitchell-Lama development. At Knickerbocker Plaza on the Upper East Side, the owners also have told tenants the building is exiting the Mitchell-Lama program. A letter was delivered throughout the 578-apartment complex in mid-July. Both Mitchell-Lama developments now have a year before rents may go up to market rate. Also like Starrett, Knickerbocker Plaza was first occupied in 1974 and, as a result, might not be covered by any rent stabilization after a buyout. It, too, would be opened to what the market can bear.

– Rachel Nielsen